Economic Determinants of Foreign Direct Investment in Armenia, Kyrgyz Republic and Turkmenistan: Theory and Evidence

The aim of the present study is to investigate the effects of different economic determinants on foreign direct investment (FDI) for three countries selected from Central Asia namely Armenia, Kyrgyz Republic and Turkmenistan. Secondary data for the period from 1991 to 2009 taken from World Development Indicator (various issues) have been utilized. Simple econometric model in log form and the least squares technique have been used. Result found indicates positive effects of market size, official development assistance on FDI and negative effect of inflation on FDI. However, in case of Armenia, the effect of official development assistance on FDI has been found insignificant and such as in case of Kyrgyz Republic, the effect of inflation on FDI has been found insignificant with expected negative sign. Thus, findings of the study recommend that market size and official development assistance needs to be encouraged and inflation needs to be managed in order to achieve higher level of FDI and accelerate the process of economic development.